1. OECD ‘Black List’ & CRS warning will impact a number of area from onboarding questions through to data capture.
2. The OECD, on 16 October 2018, published a report on countries offering the Residence and Citizenship by Investment (CBI/RBI) schemes.
3. The OECD has analysed over 100 CBI/RBI and identified a number of schemes that potentially pose a high-risk. A list of 21 ‘high risk’ countries has been released – see below and attached link.
4. Often referred to as Golden Passports or Visas, the CBI/RBI Schemes threaten international efforts to combat tax evasion, hence posing a high-risk to the integrity of its Common Reporting Standard for taxation (CRS).

Residence/Citizenship by investment schemes

1. While residence and citizenship by investment (CBI/RBI) schemes allow individuals to obtain citizenship or residence rights through local investments or against a flat fee for perfectly legitimate reasons, they can also be potentially misused to hide their assets offshore by escaping reporting under the OECD/G20 Common Reporting Standard (CRS).
2. In particular, Identity Cards and other documentation obtained through CBI/RBI schemes can potentially be misused abuse to misrepresent an individual’s jurisdiction(s) of tax residence and to endanger the proper operation of the CRS due diligence procedures.
3. Potentially high-risk CBI/RBI schemes are those that give access to a low personal income tax rate on offshore financial assets and do not require an individual to spend a significant amount of time in the location offering the scheme.
4. Financial Institutions are required to take the outcome of the OECD’s analysis of high-risk CBI/RBI schemes into account when performing their CRS due diligence obligations

What should Financial Institutions do?

1. Under Section VII of the CRS, a Financial Institution may not rely on a self-certification or Documentary Evidence if the Financial Institution knows or has reason to know, that the self-certification or Documentary Evidence is incorrect or unreliable. The same applies with respect to Pre-existing High-Value Accounts where a relationship manager has actual knowledge that the self-certification or Documentary Evidence is incorrect or unreliable.
2. In making the determination whether a Financial Institution has reason to know that a self-certification or Documentary Evidence is incorrect or unreliable, it should take into account all relevant information available to the Financial Institution, including the results of the OECD’s CBI/RBI risk analysis.
3. As a result, where, taking into account all relevant information, the facts and circumstances would lead the Financial Institution to have doubts as to the tax residency(ies) of an Account Holder or Controlling Person, it should take appropriate measures to ascertain the tax residency(ies) of such persons.
4. To the extent that the doubt is related to the fact that the Account Holder or Controlling Person is claiming residence in a jurisdiction offering a potentially high-risk CBI/RBI scheme, FIs may consider raising further questions, including:

1. Did you obtain residence rights under an CBI/RBI scheme?
2. Do you hold residence rights in any other jurisdiction(s)?
3. Have you spent more than 90 days in any other jurisdiction(s) during the previous year?
4. In which jurisdiction(s) have you filed personal income tax returns during the previous year?

5. The responses to the above questions should assist Financial Institutions in ascertaining whether the provided self-certification or   Documentary Evidence is incorrect or unreliable.

Read full update here

Country list